DO SELLER INCENTIVES WORK?

The sad fact is that I have not seen incentives work in this market.  I have had sellers offer new in-the-box 42” flat screen TV’s, $1,000 agent bonuses, 1-year home warranties, carpet allowances, gas cards, even “price reduced” riders on their sign, and just about anything else you can think of.  All those things cost – or will cost – the seller money at closing.  Here’s why they generally haven’t worked:

• TV’s are nice, but aren’t enough incentive (they’re not very expensive any more) to sway a decision on a major purchase such as a home.
• Agent bonuses:  the agent does not make the decision on what to buy, the buyer does, so putting money in the agent’s pocket is nice for them but doesn’t help sell the home, especially since buyers are doing their own research on the internet.
• Buyers are going to ask you for (and probably get) a home warranty as part of the contract, anyway, and they know it.
• Advertising a carpet allowance (or any other allowance) up front only tells potential buyers that the home is in bad shape.
• Gas cards:  Even a $500 gas card only translates to 5 or 6 fill-ups, and that’s not enough incentive to buy a house.
• “Price reduced” signs say one of 2 things… “This house was overpriced to begin with” or “This house is failing to sell” so maybe there’s something wrong with it.

 

Of course, if they don’t work, most of the incentives cost you nothing, but they don’t gain you anything either.

However, since they don’t really work, the better strategy is to take what you would have spent on an incentive and deduct it from your price.  As a matter of fact, I believe that you should price your house as close to your bottom acceptable price as possible, then just negotiate hard to get as close as possible to that number when you get an offer.  Having listed your home with Crawford Realty, you have at LEAST a 2.5% advantage (and maybe as much as 5 ½% over traditionally-listed comparable homes because of the higher commission structure they are locked into.  In this market, other buyer requirements like bedrooms or school systems being met, price will be the winning factor.  Many people out there on the market are keeping their prices up so they have “wiggle room” to negotiate, but the fact is they’re missing the boat, because price-conscious buyers are passing them by, not even looking at their home.  Better to bite the bullet up front and get the activity if you can, because you can’t sell anything to someone who isn’t even looking at it.

 

There is only one thing that I can think of other than rock bottom pricing, and that is a “purchase money mortgage” or seller financing.  If a seller can hold a mortgage for a buyer, the buyer who might have a tough time getting a standard mortgage now might be able to buy, and an appraisal isn’t necessary.  Most sellers can’t afford to do it, so it’s a huge advantage over your competition, if you can.  Of course, if the buyer defaults, you still get your collateral…the house…back!  Talk to me if this is interesting to you.

 

Finally, it’s tough to catch a fish when the fish aren’t biting.  Of course there are buyers out there, but relatively few, with a huge selection to choose from.  So patience may be the only final alternative…things will come back, but with the bank failure news of last Friday, they were saying on TV this morning that getting a mortgage is going to become even more difficult right now, so with gas prices, oversupply of homes, too few buyers, people’s savings dwindling on the stock market, and the tough economy, we are in a perfect storm for real estate sales.  It will come back, but probably not soon. 

 

I hope all this makes sense.  I desperately wish I were a house selling wizard, and I’ve tried to get as close to that as possible, but I just can’t seem to find that magic wand…yet.